Jakarta, November 5, 2024 – Growing global commitments to climate change mitigation are raising sustainability standards in international trade. To keep domestic products competitive, the Institute for Essential Services Reform (IESR) highlights the need for the government to expedite the transition to renewable energy and decarbonization in the industrial sector.
The European Union is introducing the Carbon Border Adjustment Mechanism (CBAM), set to take full effect in 2026. Under this policy, products with high carbon footprints will be subject to additional taxes. Sectors expected to be significantly impacted by CBAM include cement, fertilizers, electricity, iron and steel, and aluminum.
IESR’s Energy System Transformation Program Manager, Deon Arinaldo, noted at the Indonesia Energy Transition Dialogue (IETD) 2024 that, in 2022, the industrial sector accounted for 43.90 percent of Indonesia’s energy consumption. This high demand has driven industrial emissions up by 30 percent, totaling 400 million tons of CO₂ equivalent.
“Decarbonizing the energy used in industrial heating can significantly cut emissions, thereby reducing the sector’s carbon footprint and enhancing the competitiveness of domestic products. Currently, over 60 percent of industry players are willing to decarbonize, provided the government commits to creating a level playing field,” Deon explained.
Deon also mentioned that the government is developing a decarbonization roadmap for the industrial sector in Indonesia, with IESR contributing to the review, particularly for light industries such as textiles, food and beverages, automotive, ceramics, and glass. Beyond the roadmap, he emphasized that the government should make energy transition and decarbonization integral to industrial growth, given market shifts such as the potential for ammonia use in fertilizers and energy applications.
Ning Wilawati, Expert Council Member to Prabowo-Gibran, noted during the IETD 2024 session “Shifting Indonesia’s Economy and Industry Amidst the Energy Transition” (5/11/2024) that industrial growth support is crucial for achieving the president’s eight percent growth target. This support could include providing cost-competitive, cleaner energy for industrial operations.
The Indonesia Energy Transition Dialogue (IETD) 2024, now in its seventh year since its 2018 debut, took place from November 4-6 under the theme “Realizing an Equitable and Orderly Energy Transition.” Featuring 11 sessions across various formats and topics, IETD 2024 hosted 50 national and international speakers, panelists, and moderators.
The outcomes of IETD 2024 will be compiled and presented as recommendations to the Prabowo-Gibran administration, guiding them in fostering an equitable energy transition and achieving energy independence over the next five years.
